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What Goes into Your Credit Score?

Alerus | DEC 27, 2017

Most people know credit scores exist and that higher scores help when you’re looking to borrow money for a home or get a new credit card. But far fewer people know what really goes in to a credit score calculation, and that can make the whole thing a bit mysterious. Let’s dig in to the five elements that make up a FICO credit scoring model.

Payment History – 35%: FICO and creditors believe past payment behavior is indicative of future payment behavior, and so repayment of past debt is the most important factor in a credit score. Making consistent, on-time payments is one of the best ways to increase a credit score.

Credit Utilization – 30%: Of all the credit available to you, what percentage are you actually using? FICO says about 7 percent usage is ideal, but up to 20 percent is ok. This rule of thumb applies to balances on individual credit cards as well as your overall credit picture.

Length of Credit History – 15%: In general, a longer credit history ups your chances of having a higher score. Factors include the age of your oldest account, the age of your newest account, and the length of time since the most recent action on your accounts.

New Credit – 10%: Opening multiple lines of credit in a short time is viewed as a risky sign, especially if you’re a borrower who doesn’t have a very long credit history.

Types of Credit – 10%: This category can be a bit vague, but FICO indicates that a history of paying back different types of debt is a good thing. A good mix would include credit cards, home loans, installment loans, and other forms of payment.


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